Latest from BCA Research
An unprecedented trade surplus has given Indonesia a rare opportunity to transition into a lower real rates regime. The sustainability of Indonesian stocks outperformance is contingent upon whether the authorities can do so.
April’s CPI report was soft enough to justify a Fed pause in June. However, the overall economic data still don’t justify the magnitude of rate cuts priced into the yield curve.
There is a 50:50 chance of experiencing a major deflationary shock in the next two years, and an even greater likelihood on a longer timeframe. The good news is that several assets provide a good insurance against this risk, and that this insurance is now cheap. Plus we highlight a compelling commodity pair-trade.
This week we are sending you a transcript of my conversation with one of China’s most prominent and influential pro-market economists. Topics raised during my conversation with this Chinese expert may offer our clients important insights and provide context into recent developments in China’s economy.
The S&P 500 was up through 1Q23 and in April, despite the prevailing banking crisis, recession fears, and rising rates. The market is still not adequately pricing tighter monetary conditions, slowing growth, and economic uncertainty. Disappointment may be in store. We remain defensively positioned.
The ECB continues to focus on lagging indicators and risks once again to cause a policy error that unduly hurts European growth. What does it mean for investors?
Although our take has not changed yet, the immediate emergence of a second wave of banking system stresses poses a new threat to our constructive near-term economic and market views and will have to be monitored carefully.
The Fed increased interest rates by 0.25% during its May FOMC meeting, a hike that was both well-telegraphed and widely anticipated. However, the FOMC statement and post-meeting press conference of Chairman Powell had enough for both bulls and bears to stay entrenched in their respective positions. A few bullet points below are what we heard and our take in the context of US equities.
If the recession begins this year, it is unlikely to be mild, because inflation will not have fallen by enough to allow the Fed to cut rates aggressively. In contrast, if the recession starts in 2024 or later, when inflation is likely to be much lower, the Fed will be able to cushion the blow. Our base case remains a 2024 recession but the risks around that view have increased in light of recent banking stresses.
The initial phase of the EU’s ambitious CBAM will launch 1 October and will begin collecting a carbon tax in 2026. Between now and then, it will be challenged as it attempts to put a price tag on CO2 emissions as imports cross the EU border. The CBAM will impart an inflationary bias in EU commodity and goods markets as 2026 draws near and importers have to secure EU ETS credits, the number of which, by design, will contract over time.